Vista Outdoor(VSTO) - 2021 Q2 - Quarterly Report

PART I - Financial Information Item 1. Unaudited Financial Statements Unaudited condensed consolidated financial statements for Q3 2020, covering balance sheets, income, cash flow, and equity Condensed Consolidated Balance Sheet Highlights (as of Sep 27, 2020 vs Mar 31, 2020) | Metric | September 27, 2020 ($ in thousands) | March 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Total Assets | $1,431,321 | $1,391,289 | | Total Current Assets | $784,785 | $709,011 | | Total Liabilities | $856,684 | $948,784 | | Long-term Debt | $345,305 | $511,806 | | Total Stockholders' Equity | $574,637 | $442,505 | Condensed Consolidated Statements of Comprehensive Income Highlights | Metric | Three Months Ended Sep 27, 2020 ($ in thousands) | Three Months Ended Sep 29, 2019 ($ in thousands) | | :--- | :--- | :--- | | Sales, net | $575,179 | $445,016 | | Gross Profit | $161,890 | $90,264 | | Net Income (Loss) | $79,645 | $(11,898) | | Diluted EPS | $1.34 | $(0.21) | Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended) | Metric | Six Months Ended Sep 27, 2020 ($ in thousands) | Six Months Ended Sep 29, 2019 ($ in thousands) | | :--- | :--- | :--- | | Cash from Operating Activities | $197,825 | $(8,238) | | Cash from Investing Activities | $(9,640) | $139,107 | | Cash from Financing Activities | $(166,690) | $(129,921) | | Increase in Cash | $21,581 | $876 | - Subsequent to the quarter end, on October 12, 2020, Vista acquired Remington's ammunition and accessories businesses for approximately $81.4 million. The acquisition was funded with $51 million cash on hand and a $30 million draw from the ABL revolving credit facility[101] Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, debt, segment performance, and the Remington acquisition, with no material impact from ASU 2016-13 - The company operates through two reportable segments: Shooting Sports (comprising Ammunition and Hunting/Shooting accessories) and Outdoor Products (comprising Action Sports, Outdoor Cooking, Hydration, and Golf)[19][95][96] - On April 1, 2020, the company adopted ASU No. 2016-13 regarding credit losses, which did not have a material impact on the financial statements[23] Long-Term Debt Composition | Debt Instrument | September 27, 2020 ($ in thousands) | March 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | ABL Revolving Credit Facility | $0 | $167,256 | | 5.875% Senior Notes | $350,000 | $350,000 | | Carrying Amount of Long-Term Debt | $345,305 | $511,806 | - The Coronavirus Aid, Relief, and Economic Security (CARES) Act favorably impacted the tax provision by allowing increased interest expense deductions and NOL carryback refund claims to higher tax rate years[82][83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 FY2021's strong sales growth, strategic transformation, improved profitability, and debt reduction Business Overview and Strategy Vista Outdoor operates two segments, Shooting Sports and Outdoor Products, pursuing a multi-year strategic transformation - The company's business is divided into two reportable segments: Shooting Sports (68% of sales) and Outdoor Products (32% of sales) for the six months ended September 27, 2020[109] - The company's multi-year strategic transformation plan aims to drive profitable growth through five key pillars: optimizing structure, creating centers of excellence (operations & e-commerce), reducing leverage, fostering organic growth, and making tuck-in acquisitions[108][110][114] Financial Highlights and Outlook Q2 FY2021 saw significant sales, gross profit, and EBIT increases, influenced by personal protection and outdoor recreation trends Q2 FY2021 Financial Highlights (vs Q2 FY2020) | Metric | Q2 FY2021 | Change vs Q2 FY2020 | | :--- | :--- | :--- | | Sales | $575.2M | +29.2% | | Gross Profit | $161.9M | +79.4% | | EBIT | $75.3M | +5,658% | | Diluted EPS | $1.34 | from $(0.21) | - The principal balance on the ABL Revolving Credit Facility was reduced to $0 during the quarter using cash from operations[115] - The outlook for Shooting Sports is influenced by nationwide civil unrest, the COVID-19 pandemic, and the 2020 U.S. presidential election cycle, with a growing trend towards personal protection[116] - The Outdoor Recreation industry is expected to see continued increases in participation as consumers substitute local outdoor activities for travel due to the COVID-19 pandemic[117][120] Results of Operations Net sales increased 29.2% driven by both segments, with gross profit surging 79.4% and EBIT dramatically rising Net Sales by Segment (Three Months Ended) | Segment | Sep 27, 2020 ($ in thousands) | Sep 29, 2019 ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Shooting Sports | $379,687 | $300,324 | 26.4% | | Outdoor Products | $195,492 | $144,692 | 35.1% | | Total Net Sales | $575,179 | $445,016 | 29.2% | Gross Profit by Segment (Three Months Ended) | Segment | Sep 27, 2020 ($ in thousands) | Sep 29, 2019 ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Shooting Sports | $104,983 | $50,069 | 109.7% | | Outdoor Products | $56,907 | $40,917 | 39.1% | | Total Gross Profit | $161,890 | $90,264 | 79.4% | EBIT by Segment (Three Months Ended) | Segment | Sep 27, 2020 ($ in thousands) | Sep 29, 2019 ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Shooting Sports | $70,337 | $15,994 | 339.8% | | Outdoor Products | $26,385 | $10,327 | 155.5% | | Total EBIT | $75,256 | $1,307 | 5,657.9% | - Interest expense for the quarter decreased by 53.6% to $5.7 million from $12.3 million in the prior year, primarily due to a reduction in the average principal debt balance[138] Liquidity and Capital Resources Liquidity significantly improved with operating cash flow increasing to $197.8 million, enabling ABL facility repayment - Cash provided by operating activities increased by $206.1 million in the first six months of FY2021 compared to the prior year, driven by higher net income and favorable working capital changes[145] - As of September 27, 2020, the company had $348.8 million available under its ABL Revolving Credit Facility, with no outstanding borrowings[149] - Total debt as a percentage of total capitalization was 37.9% as of September 27, 2020[151] Item 3. Quantitative and Qualitative Disclosures about Market Risk Market risks from interest rates, commodity prices, and foreign currency exchange rates remain consistent with prior fiscal year disclosures - Market risks from interest rates, commodity prices, and foreign currency exchange rates are similar to those disclosed in the fiscal 2020 Form 10-K[163] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of September 27, 2020, with no material changes to internal control - Management concluded that disclosure controls and procedures were effective as of the end of the quarter[164] - No material changes to internal control over financial reporting occurred during the six months ended September 27, 2020[165] PART II - Other Information Item 1. Legal Proceedings No currently pending legal proceedings are considered material to the company's business or financial condition - The company does not consider any currently pending legal proceedings, individually or in the aggregate, to be material to its business or financial condition[167] Item 1A. Risk Factors No material changes to the Risk Factors previously disclosed in the Annual Report on Form 10-K - There have been no material changes to the Risk Factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2020[169] Item 6. Exhibits This section lists filed exhibits, including agreements, corporate governance documents, debt instruments, and certifications - The exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer, as well as financial statements formatted in iXBRL[174]